Latest / Bloomberg Intelligence / Dollar General Shares Sink, Nvidia Earnings

Transcript

Dollar General Shares Sink, Nvidia Earnings · Bloomberg Intelligence

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
0:08
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
0:12
Speaker 2: weekdays at ten am Eastern on Affle Card playing Android
0:15
Speaker 2: Auto with the Bloomberg Business App. Listen on demand wherever
0:18
Speaker 2: you get your podcasts, or watch us live on YouTube.
0:23
Speaker 3: Under those retailers, I mean Dollar General, the numbers came in,
0:27
Speaker 3: blow expectations, guidance, blow expectations, stock well, blow expectations of
0:34
Speaker 3: socks down twenty eight percent today, hitting an all time low.
0:37
Speaker 3: My question, Emily and will talk to Jen Bartashes, She's
0:40
Speaker 3: a Bloomberg Intelligence. My question is is the consumer versus
0:44
Speaker 3: Dollar General specific? So Jen Bartash's Bloomberg Intelligence. Thank so
0:48
Speaker 3: much for joining us here. I'm trying to get a
0:50
Speaker 3: sense Jen of kind of how much of this is
0:52
Speaker 3: just the lower end consumer facing economic headwinds versus Dollar
0:58
Speaker 3: General just doesn't have it together in terms of good stores,
1:01
Speaker 3: good product, good inventory management.
1:03
Speaker 4: Help us break it down.
1:05
Speaker 5: Yeah, good morning, Paul. So when we look in at
1:07
Speaker 5: Dollar General, we do think a lot of their current
1:10
Speaker 5: troubles are self inflicted. There's no doubt that the low
1:14
Speaker 5: income consumer is under pressure, but this is their core
1:17
Speaker 5: consumer that they know better than anybody else. And the
1:19
Speaker 5: fact that they're misreading where that consumer is and not
1:23
Speaker 5: you know, not ready to serve them in the way
1:26
Speaker 5: that they need to be served is a little bit concerning.
1:28
Speaker 5: So we're looking for you know, they're saying that they're
1:31
Speaker 5: going to increase, you know, spending on promotions, they're going
1:34
Speaker 5: to mark down prices, try to get customers back into stores.
1:38
Speaker 5: But we'll be really watching them for the rest of
1:40
Speaker 5: the year and how they execute against those plans.
1:42
Speaker 6: So John Tucker was talking about how Dollar General needed
1:47
Speaker 6: to improve their store experience, perhaps take up a get
1:51
Speaker 6: a mom, get a mom.
1:53
Speaker 4: I'm just like once a week, maybe somebody clean the store.
1:56
Speaker 6: How much of this is actually about the products that
1:58
Speaker 6: they're offering versus the in store experience. When we talk
2:02
Speaker 6: about Dollar General trying to lure customers back in.
2:06
Speaker 5: It's a great question. And having clean, safe, well lit
2:10
Speaker 5: stores is a basic of retail. And you know, when
2:13
Speaker 5: Dollar General says they're executing on a back to basic strategy,
2:16
Speaker 5: that should be part of that strategy. We've all seen
2:20
Speaker 5: reports of just you know, boxes piled in the aisles
2:23
Speaker 5: and unable to navigate and consumers, you know, not having
2:26
Speaker 5: a great experience in store. I think that that is improving,
2:30
Speaker 5: it's just not yet at the pace where it's consistent
2:33
Speaker 5: across their entire chain and where consumers are really responding
2:36
Speaker 5: to it.
2:37
Speaker 4: Hey, Jen, if.
2:40
Speaker 3: Consumer doesn't go to Dollar General, where does that consumer go?
2:44
Speaker 5: Well, you know, it's interesting, but we're seeing big market
2:48
Speaker 5: share gains at the likes of Walmart also in the
2:50
Speaker 5: hard discount grossers like Aldi. So you know, consumers are
2:54
Speaker 5: looking for where they're going to get the best deal,
2:56
Speaker 5: and whether that's on an everyday low price it's something
2:59
Speaker 5: like a Walmart or an Aldi, or are they're doing
3:01
Speaker 5: more cherry picking of deals, you know at regular grocery
3:04
Speaker 5: stores or other types of of retail stores, buying things
3:09
Speaker 5: specifically on promotion in order to save money. So, you know,
3:13
Speaker 5: Dollar General talked about not getting enough of the available
3:16
Speaker 5: share that's up for grabs, But part of that is
3:19
Speaker 5: is that other companies like a Walmart are really executing
3:23
Speaker 5: well right now and are capturing more of those consumers.
3:26
Speaker 6: Let's talk about the stock because it is down twenty
3:29
Speaker 6: eight percent right now, the worst inter day drop on record.
3:33
Speaker 6: What do you make of that move? Is that really
3:36
Speaker 6: justified today?
3:38
Speaker 5: Well? That's a very very steep drop. And I think
3:40
Speaker 5: part of the reaction is that in the second quarter,
3:43
Speaker 5: the the the kind of sentiment was that the turnaround
3:48
Speaker 5: plan was gaining traction, and all of a sudden, the
3:50
Speaker 5: bottom sort of fell out of that. And that's the
3:52
Speaker 5: response that you're seeing with the stock today. You know,
3:56
Speaker 5: is it as bad as you know, as the stock
3:59
Speaker 5: price might might be saying. It's hard to say. I mean,
4:02
Speaker 5: they still had positive same store sales, they still had
4:04
Speaker 5: positive traffic into stores. You know, they seem to have
4:08
Speaker 5: a plan for how they're going to build on that
4:09
Speaker 5: in the second half. But it really at this point,
4:12
Speaker 5: the message is that people want to see execution by
4:15
Speaker 5: the management team.
4:16
Speaker 4: Hey, Jen, thanks so much for joining us. Really appreciate it.
4:18
Speaker 3: Jen Bartashes, she's a senior retail analysts for Bloomberg Intelligence.
4:22
Speaker 3: Let me tell you, folks, Jen, we asked Jen Bartashes
4:25
Speaker 3: to join us, I don't know, twelve thirteen, fourteen years
4:27
Speaker 3: ago Bloomberg Intelligence. She was already a season Bloomberg executive
4:31
Speaker 3: and she's like, I'm not a research analyst. We said, no,
4:34
Speaker 3: you're really, really smart. We'll teach you how to be
4:36
Speaker 3: a rechannel analyst, and sure enough, here we are, and
4:39
Speaker 3: she's one of the leading voices on Wall Street. We
4:41
Speaker 3: appreciate getting a few minutes of a time. She really
4:43
Speaker 3: knows the retail space, helping us break down the dollar
4:45
Speaker 3: general stuff.
4:46
Speaker 4: So we appreciate that.
4:48
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
4:52
Speaker 2: weekdays at ten am Eastern on applecar Play and Android
4:56
Speaker 2: Auto with the Bloomberg Business. You can also listen live
4:59
Speaker 2: on ammaz on Alexa from our flagship New York station
5:02
Speaker 2: just Say Alexa playing Bloomberg eleven.
5:06
Speaker 4: Let's check in with Dan Morgan.
5:08
Speaker 3: He's a senior portfolio manager Sonova's trust company. Joining us
5:12
Speaker 3: on zoom from Atlanta. Hey, Dan, what did you make
5:16
Speaker 3: of the Nvidia.
5:18
Speaker 4: Earnings last night? The conference call?
5:20
Speaker 7: All event, Well, I have kind of a little bit
5:24
Speaker 7: more of a positive bias view towards the stock and
5:26
Speaker 7: maybe the rest of the street. Does. You have to
5:28
Speaker 7: bear in mind that we added in video to our
5:30
Speaker 7: buy list back in about twenty eighteen, twenty nineteen, when
5:34
Speaker 7: they were, you know, really gaining a lot of momentum
5:38
Speaker 7: in the data center space, kind of gaining market share
5:40
Speaker 7: against the likes of AMD and Intel. And up to
5:43
Speaker 7: that point, as you know, they were construed as a
5:46
Speaker 7: company that produced chips that were going into you know,
5:49
Speaker 7: various video games that people played, and you know, they
5:51
Speaker 7: had a big spike in their demand during COVID and
5:54
Speaker 7: then it kind of pulled back on that, and then
5:57
Speaker 7: obviously the whole thing flipped where their data center revenue
6:00
Speaker 7: became far greater than the gaming unit. And then the
6:03
Speaker 7: AI thing exploded about you know, a couple of years ago.
6:06
Speaker 7: It's the rest is history. So you know, overall, to
6:09
Speaker 7: be honest with you, I think this is a stellar report.
6:12
Speaker 7: I think the street has just gotten a point where
6:14
Speaker 7: it becomes so spoiled with these huge, you know, colossal
6:18
Speaker 7: beats that Nvidia's put together the last four or five
6:20
Speaker 7: quarters that their expectations have just gone off the you know,
6:24
Speaker 7: off the ray. I mean, even if you look at
6:26
Speaker 7: this number they did on the third quarter, you know,
6:29
Speaker 7: they topped the consensus essmate. Obviously there was Whisher numbers
6:33
Speaker 7: at thirty three and thirty four billion, but you know,
6:36
Speaker 7: let's face reality, it was a strong, strong number thirty
6:40
Speaker 7: two point five billion. So I think everything is still
6:43
Speaker 7: on track with Nvidia to ship the Blackwell chip. Out
6:47
Speaker 7: next year in volume, and I would expect margins to
6:51
Speaker 7: continue to rise because the average selling prices on these
6:54
Speaker 7: Blackwells are anywhere from twenty five you know, the thirty
6:58
Speaker 7: five thousand, far greater than what they're on the hopper
7:00
Speaker 7: of the H twenties.
7:02
Speaker 6: Talk a little bit about some of the production issues
7:04
Speaker 6: that Nvidia is having with the Blackwell chips and what
7:08
Speaker 6: did you learn from this earnings report about how quickly
7:12
Speaker 6: those can be resolved?
7:15
Speaker 7: Emily, that's been one of the big issues, also supply
7:17
Speaker 7: constraints that they try to build out this network of
7:21
Speaker 7: suppliers to kind of ramp up for Blackwell. I think
7:24
Speaker 7: it was kind of expected that this upcoming October quarter
7:28
Speaker 7: that there would be some shipments out, but it's not
7:31
Speaker 7: going to be in volume. There's still going to be
7:33
Speaker 7: relying on the H twenty and the H two hundred
7:36
Speaker 7: like they did in this quarter really to really post
7:39
Speaker 7: huge gains. I just think it's growing pains. I really
7:43
Speaker 7: am not concerned about it. I think they'll work through it.
7:46
Speaker 7: They've done a dynamite job back when we're having huge
7:49
Speaker 7: supply constraints in the overall chip sector. You all probably remember,
7:54
Speaker 7: you know, trying to buy a new automobile and you
7:56
Speaker 7: can get a chip to go in a new car.
7:58
Speaker 7: I mean, they worked through that and still did very well.
8:01
Speaker 7: So I think they'll get through this hurdle and they'll
8:04
Speaker 7: start doing volume probably, like I said, first half of
8:07
Speaker 7: twenty five. So again, you know, Emily and Paul, you're
8:10
Speaker 7: asking the wrong guy, right, because I'm an eternal n
8:13
Speaker 7: Vidio bull.
8:15
Speaker 3: Hey, Dan, farbe it from me to call you an
8:17
Speaker 3: old man, but you've been covering his tech industry for
8:19
Speaker 3: a long time.
8:20
Speaker 4: Where are the competitors here? That's kind of my question.
8:23
Speaker 4: I would think with this we'd see the AMDs of the.
8:26
Speaker 3: World and some others, really Intel, even Intel, Maybe why
8:30
Speaker 3: does Nvidia have seemingly.
8:32
Speaker 4: Such a stranglehold on this part of the market.
8:35
Speaker 7: You know, it's interesting, Paul. When I started really you know,
8:38
Speaker 7: diving into the stock and covering you very closely, sitting
8:41
Speaker 7: in on the developer conferences and all the conference calls,
8:44
Speaker 7: they would mention AI. They talk more about omniverse, and
8:48
Speaker 7: then of course the AI thing took off, and that,
8:50
Speaker 7: by the way, we're seventy percent of the AI market.
8:53
Speaker 7: They would mention that in their public release and nobody
8:55
Speaker 7: would care. But you're right, you know, everybody else has
8:59
Speaker 7: been extremely late getting to the table. You've got AMD
9:02
Speaker 7: with their Mi three hundred chips. You've got Intel rolling
9:06
Speaker 7: out their Dotty two, Gotty three and their Falcon shores
9:09
Speaker 7: next year, but again that's in twenty five. Marvel has
9:12
Speaker 7: the pam DSP chip. You probably covered on your show
9:16
Speaker 7: about yahweh coming out with their Ascend nine ten C
9:21
Speaker 7: chip to compete against the H twenty. But you know,
9:23
Speaker 7: Paul and Emily, where the real competition may come in
9:26
Speaker 7: is from the hyperscalers, who are their top purchasers, right
9:29
Speaker 7: about fifty percent of their revenues coming from them with
9:32
Speaker 7: their own internal chips. You know, we know that Meta,
9:35
Speaker 7: We know that Google has the TensorFlow chip that they
9:39
Speaker 7: developed with Broadcom. They have version six right now. I
9:42
Speaker 7: think there's a dual chip coming out called Athena that
9:46
Speaker 7: they're working on also. So there's there's a lot with AMD.
9:50
Speaker 7: There's a lot of things going on internally where these
9:52
Speaker 7: hyperscalers are trying to become rest reliant on Nvidia. But
9:57
Speaker 7: quite frankly, guys, the chips are coming out with still
9:59
Speaker 7: aren't going to pop the performance they're going to get
10:02
Speaker 7: out of blackwell, but I think I'd use it for
10:04
Speaker 7: lesser capability, you know, task so to speak, and try
10:08
Speaker 7: to save some money from as I mentioned, for the
10:10
Speaker 7: average selling prices are very higher on these newer chips.
10:14
Speaker 6: So revenue doubled in the quarter, Dan, but yet the
10:19
Speaker 6: stock is down this morning. I'm just wondering. I know
10:23
Speaker 6: you said that investors might be getting a little spoiled.
10:26
Speaker 6: What do we need, like, what does the street want
10:29
Speaker 6: to see out of Nvidia then to move this stock
10:33
Speaker 6: up higher? If revenue doubling isn't isn't enough?
10:38
Speaker 7: Yeah, I mean again, Emily, it's perplexing for me. I
10:40
Speaker 7: Like you said, you look at the revenue year over year,
10:43
Speaker 7: it was up you know a huge amount, one hundred
10:46
Speaker 7: and twenty two percent. You had the data center group,
10:49
Speaker 7: which one hundred and fifty four percent. I've got the
10:52
Speaker 7: data center group going over one hundred billion dollars in
10:56
Speaker 7: revenue for twenty five compared to forty four billion them
11:00
Speaker 7: in twenty four. So that's more than a double just
11:03
Speaker 7: in that unit. So again, this has become such a
11:07
Speaker 7: momentum stock, right, I mean, trades, it's sixty times price
11:11
Speaker 7: to book. The Philadelphia Stock Exchange Index trades at six
11:15
Speaker 7: times book. You know, it's a trailing seventy five times earnings.
11:19
Speaker 7: So you have this massive multiple, this huge momentum, you
11:22
Speaker 7: have this situation where you can't make any errors at
11:26
Speaker 7: anything that you're reporting, otherwise you're bringing the stock down.
11:29
Speaker 7: So again, I just think quite frankly, and Vidia has
11:33
Speaker 7: kind of spoiled investors, you know, since that Dynamite quarter
11:37
Speaker 7: about two and a half years ago, and people just
11:40
Speaker 7: keep raising the bar and raising the bar and they're
11:42
Speaker 7: never satisfied, but they're still doing really well.
11:46
Speaker 3: Hey, Dan, you know you raise for me what I
11:48
Speaker 3: think would be the biggest risk, which is my customers
11:52
Speaker 3: are going to develop their own chips.
11:55
Speaker 4: Frame that risk out for me, and how do you
11:57
Speaker 4: think about that?
11:59
Speaker 7: Yeah, I mean that is a risk. Every single hyperscale,
12:03
Speaker 7: as I mentioned, has their own chips. Probably the best
12:06
Speaker 7: chip out there is going to be coming from Alphabet
12:10
Speaker 7: and the Broadcom joint venture with their Tenser version six
12:13
Speaker 7: what they're bringing out. So you know, that's the worry.
12:18
Speaker 7: Even Apple has their own chips now. So the worry
12:21
Speaker 7: is that instead of buying all their chips from the
12:23
Speaker 7: video or eighty ninety percent of chips from the video,
12:26
Speaker 7: maybe a little bit from AMD, let's say, or Marvel.
12:29
Speaker 7: They may start, you know, keeping thirty forty percent in
12:32
Speaker 7: house in saving money and using their own chips. So
12:35
Speaker 7: that does potentially slow demand down for nvidio chips in
12:38
Speaker 7: the data center space. However, if you're a you know,
12:41
Speaker 7: probably the man, you know, someone in charge of this
12:44
Speaker 7: or a video, you're saying, well, guess what we're We're
12:46
Speaker 7: starting to get demand from other sources, right enterprise, We've
12:50
Speaker 7: got demand from Tesla. They talk about different governments who
12:53
Speaker 7: are now buying data center chips for their own use.
12:56
Speaker 7: So you can make a case that yeah, maybe you're
12:58
Speaker 7: going to lose a little bit from the homegrown stuff
13:01
Speaker 7: coming from the hyperscalal, but then you're going to be
13:03
Speaker 7: able to grow it out by the fact that you're
13:05
Speaker 7: going to get greater demand from these other markets that
13:08
Speaker 7: you're not getting right now. So you know, it's great
13:13
Speaker 7: to Yeah, I mean there's a lot of moving parts,
13:14
Speaker 7: but I mean I still feel u Paul Emily, that
13:17
Speaker 7: we're at the beginning of this this ride out and
13:19
Speaker 7: you know, the key to making money and technology and
13:22
Speaker 7: all you alluded to the fact that I've been in
13:24
Speaker 7: this for a long time. I've been writing, research and
13:26
Speaker 7: following and buying tech stock since nineteen ninety. The key
13:31
Speaker 7: is to ride a wave, and if you ride away,
13:34
Speaker 7: it always goes up and then rides out. And you know,
13:38
Speaker 7: in the early nineties you had the big you know,
13:40
Speaker 7: move towards the internet, everybody going to a mobile phone.
13:43
Speaker 7: If you caught one of those waves at the right stock,
13:45
Speaker 7: you did great. So exactly you're on an AI wave
13:48
Speaker 7: in the chip space right now with n video.
13:49
Speaker 3: Very good, Dan Morgan, thanks so much for that. We
13:51
Speaker 3: really appreciate gating a few minutes of your time, Dan Morgan.
13:53
Speaker 3: He's a senior portfolio manager Sonova's trust company down there
13:57
Speaker 3: in Atlanta. He was early on in video, he was
14:01
Speaker 3: right on in video, and it's been a heck of
14:05
Speaker 3: a run this stock.
14:07
Speaker 4: Just this year, up one hundred and forty two percent year.
14:10
Speaker 2: Today, you're listening to the Bloomberg Intelligence Podcast. Catch us
14:16
Speaker 2: live weekdays at ten am Eastern on applecar Playing and
14:19
Speaker 2: broud Otto with the Bloomberg Business app. Listen on demand
14:22
Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
14:27
Speaker 3: Like yourfeos sitting in for Alex Steel on Paul Sweeney.
14:30
Speaker 3: We're live here in our Bloomberg Interactive Brokers studio. We're
14:32
Speaker 3: streaming live on that internet thing that Gene Monster keeps
14:36
Speaker 3: talking about. I think you go to YouTube dot com
14:37
Speaker 3: and search Bloomberg Podcast, and I think.
14:39
Speaker 4: That's where you'll find us. I'm not really sure you'll
14:42
Speaker 4: know that.
14:42
Speaker 3: One of the topics that Alex Steel and I like
14:44
Speaker 3: to talk about Emily.
14:45
Speaker 4: Is commercial real estate.
14:46
Speaker 3: So it's just fascinating how that industry is adapting to
14:49
Speaker 3: a post pandemic world, particularly in the office, but also
14:52
Speaker 3: just across the border commercial real estate and what it
14:54
Speaker 3: means for the banks and all that kind of stuff. Fortunately,
14:57
Speaker 3: we've got a lot of good folks to help us figure.
14:59
Speaker 4: Out what going on.
15:01
Speaker 3: And Abigail Doolittle, I mean, she covers all the markets
15:03
Speaker 3: for Bloombergers, but she's been really helpful in bringing some
15:06
Speaker 3: smart commercial real estate people into Bloomberg Radio, and we
15:09
Speaker 3: appreciate Abigail. She joins us here in our studio along
15:11
Speaker 3: with Scott Kelly. He's a founder and CEO of Ato's
15:14
Speaker 3: Capital real Estate. Scott's one of these guys. He's part
15:17
Speaker 3: of that Morgan Stanley real Estate mafia. They're everywhere. Anytime
15:21
Speaker 3: you see a commercial real estate person come in here
15:24
Speaker 3: with some money in their pockets talking to investing. They
15:27
Speaker 3: did a stint at Morgan Stanley real Estate and they
15:30
Speaker 3: just the best on the street as long as I've
15:32
Speaker 3: been on the street.
15:33
Speaker 4: Scott, thanks so much for joining us here.
15:36
Speaker 3: I guess my question is simply, where do you guys
15:39
Speaker 3: see the best value and opportunity in commercial real estate today?
15:43
Speaker 3: Are you going to the Lipstick Building or something like
15:46
Speaker 3: it on Third Avenue that's dealing with occupants issues.
15:49
Speaker 4: Are you looking at other places?
15:51
Speaker 8: Well, I would I'd make two points one. People have
15:56
Speaker 8: been us included anticipating this stressed wave of real estate
16:02
Speaker 8: which has not come as quickly as folks thought. But
16:06
Speaker 8: it's also inevitable just because the refinancing rates are totally
16:12
Speaker 8: disconnected from the underwriting of a bunch of these properties.
16:16
Speaker 8: So the answer is no, We're focused on places we
16:21
Speaker 8: can add value. And we've got a new company called
16:24
Speaker 8: waiver Tree Property Partners, which we've got development capabilities from
16:29
Speaker 8: guys that were with the Fract family for a long time.
16:35
Speaker 8: I mean, they're good developers. We think that the combination
16:39
Speaker 8: of financial expertise and development. Redevelopment is going to be
16:44
Speaker 8: the key to making money going forward.
16:46
Speaker 9: So a question that I have, Scott, is that we've
16:48
Speaker 9: all been waiting for this crash and commercial real estate,
16:51
Speaker 9: and there were some big headlines in twenty twenty three,
16:54
Speaker 9: there were some big office buildings that were defaulted on,
16:57
Speaker 9: But since then there really hasn't been that much. It
17:00
Speaker 9: seems like properties are still not trading maybe a couple
17:03
Speaker 9: here there, Is that true? And is there going to
17:06
Speaker 9: be a moment where all of a sudden a ton
17:08
Speaker 9: of properties are going to flood the market or is
17:10
Speaker 9: it just going to take a really long time to
17:12
Speaker 9: work this thing out?
17:14
Speaker 8: Well, your observation is absolutely true. You know, again, people
17:17
Speaker 8: have been waiting for the tidal wave of stuff to happen.
17:20
Speaker 8: And there's a where is it there's a billion Well,
17:23
Speaker 8: there's a billion dollar loan portfolio on the market right
17:27
Speaker 8: now from a foreign bank that's just getting out of everything,
17:30
Speaker 8: and some of it's performing, a lot of it's not.
17:34
Speaker 8: There are a couple more coming later this year. But interestingly,
17:39
Speaker 8: as we discussed previously, so much of this bad debt
17:43
Speaker 8: is held in you know, regional and community banks, and
17:49
Speaker 8: they're just extend it's extended and pretend you know they
17:53
Speaker 8: they're renegotiating the terms, they're they're putting out the maturities.
17:58
Speaker 4: They're never going to get repaid.
18:00
Speaker 8: Can they do that for Well, I think it's a
18:02
Speaker 8: regulatory matter. I think the regulators don't have they don't
18:06
Speaker 8: want to cause a banking crisis in an election year.
18:09
Speaker 8: So I think the thing that changes is after the
18:12
Speaker 8: election the regulators start to and again, this bank that's
18:17
Speaker 8: selling a billion dollar portfolio is because there is a
18:20
Speaker 8: European bank, and it's because the European regulators are saying,
18:24
Speaker 8: get rid of this trash. And so I think that
18:29
Speaker 8: doesn't happen until after the election. But after the election,
18:32
Speaker 8: I think it really does.
18:33
Speaker 9: Interesting, So twenty twenty five could be kind of painful.
18:36
Speaker 6: Yes, we've been talking a lot about Nvidia today and
18:39
Speaker 6: this hunger for AI and demand. I'm wondering how that
18:42
Speaker 6: is impacting commercial real estate. Are you seeing opportunities in
18:47
Speaker 6: data centers?
18:49
Speaker 8: Well, yes, I mean data centers are one of the
18:52
Speaker 8: data centers are one of the big Again, real estate,
18:56
Speaker 8: if you want to go by category, office has got issues.
19:00
Speaker 8: Retail got issues increasingly apartments due to some extent, but
19:07
Speaker 8: data centers have just been on fire, and you know,
19:10
Speaker 8: and there continues to be an almost unquenchable demand for
19:15
Speaker 8: data center capacity. So yeah, I think, I mean, I
19:19
Speaker 8: do think the bigger opportunity with AI and real estate,
19:23
Speaker 8: which we're working on with a partner, is to really
19:29
Speaker 8: synthesize the information in a way to help you make
19:33
Speaker 8: not just good commercial judgments, but informed commercial judgments, data driven.
19:39
Speaker 3: Scott, You've been in this business for decades, you and
19:41
Speaker 3: your team, everybody knows you, every banker knows every lender
19:44
Speaker 3: knows you. When you go out to buy a you know,
19:47
Speaker 3: a property today, you're the equity. Can you get a
19:50
Speaker 3: loan for your capital structure? Are the banks lending?
19:53
Speaker 8: Well, that's I mean, that's that, honestly is the big
19:57
Speaker 8: issue that yes, the banks are lending, but at terms
20:01
Speaker 8: which are radically different than most of the current owners anticipated.
20:06
Speaker 8: So you know, somebody that has borrowed money at three percent,
20:10
Speaker 8: all of a sudden they get a term sheet back
20:12
Speaker 8: from the bank and it's seven or eight percent at
20:14
Speaker 8: the same loan to value ratios. So that's what inevitably
20:20
Speaker 8: is going to cause a big turnover in a repricing
20:24
Speaker 8: of the industry. It just hasn't happened yet. And the
20:27
Speaker 8: subordinated lenders are you know, are in control of all
20:31
Speaker 8: these situations when that debt matures. It's just that, you know,
20:35
Speaker 8: rather than pull the trigger right now, the banks I think,
20:39
Speaker 8: have been encouraged to push it out for a year
20:42
Speaker 8: or two so that the problem is profound, it's identifiable.
20:49
Speaker 8: It's just going to take a while to come to fruition.
20:52
Speaker 9: I'm so interested in what you were saying about the
20:54
Speaker 9: regional banks because when you joined US about a year ago,
20:57
Speaker 9: you were saying that you thought that there could be
20:59
Speaker 9: a crisis once we put this election past. Us has
21:02
Speaker 9: enough extend and pretend to happen that twenty twenty five
21:05
Speaker 9: might not be awful. Do I mean, do you think
21:07
Speaker 9: that there could be a regional banking crisis if the
21:10
Speaker 9: regulators wake up?
21:11
Speaker 8: Well, I think it's going to take as we talked about,
21:14
Speaker 8: you know, I think this is going to be a
21:16
Speaker 8: slow burn. I mean, this isn't in RTC type situation
21:20
Speaker 8: where they're gonna you know, liquidate the I mean basically
21:24
Speaker 8: the government liquidated the whole savings and loan industry. So
21:27
Speaker 8: it's a huge opportunity that probably lasted twenty four months.
21:32
Speaker 8: This is not going to be that way because this
21:34
Speaker 8: debt is all over the place. It's in really you know,
21:38
Speaker 8: bad refinancing, you know condition. But it's going to be
21:43
Speaker 8: a slow burn as opposed to everything happening at once.
21:48
Speaker 8: So I think the answer is there's going to be
21:49
Speaker 8: a lot more distress in twenty five, but the opportunity
21:54
Speaker 8: is going to last for a while.
21:55
Speaker 4: For an investor Scott.
21:56
Speaker 3: Here in New York City, there's so many families that
21:58
Speaker 3: are just owned so much real estate here in New
22:00
Speaker 3: York City hav been so successful over generations. Any of
22:03
Speaker 3: them stressed right now, really financially stressed.
22:10
Speaker 8: Some that have been more active developing recently. I mean,
22:14
Speaker 8: I'm going to tell you who, but yes there are,
22:16
Speaker 8: I mean the long term owners who've owned for a
22:19
Speaker 8: long period of time. I mean, if you look at
22:21
Speaker 8: the New York market, if you own good office properties
22:25
Speaker 8: as an example, the one thing that's really happening in
22:28
Speaker 8: the office market here is that all these buildings are
22:31
Speaker 8: being heavily immendatized. You look at you know, the three
22:37
Speaker 8: star restaurants, the gyms, the places for you know, tenants
22:41
Speaker 8: to hang out. I mean that's the way that the classic,
22:45
Speaker 8: really high quality office buildings have been able to retain
22:49
Speaker 8: their tenants, and they're really in pretty good shape. A
22:52
Speaker 8: lot of those are owned by roots, which tend to
22:54
Speaker 8: be low leverage, and a lot of these families don't
22:56
Speaker 8: have a lot of leverage. The people that are stressed
22:59
Speaker 8: are the ones that have levered up to do new developments,
23:04
Speaker 8: you know recently, particularly in the office space that just
23:07
Speaker 8: haven't worked out. But there is going to be the
23:11
Speaker 8: winners and losers that if you have you know, class
23:14
Speaker 8: B C office buildings, those are going to be really tough,
23:19
Speaker 8: where the Class A ones continue to perform pretty well.
23:22
Speaker 3: What just thirty seconds, what percentage of in York real
23:24
Speaker 3: estate would you characterize this Class A oh ten?
23:29
Speaker 4: See that's my point.
23:30
Speaker 3: I think this is going to get ugly, and that's
23:32
Speaker 3: what I keep waiting for, and we just haven't seen.
23:35
Speaker 4: I don't know. I don't know how it's going to plan.
23:36
Speaker 4: I don't know.
23:37
Speaker 3: But here on Bloomberg Intelligence, we're going to continue to
23:39
Speaker 3: cover this commercial real estate business because you think it's
23:41
Speaker 3: really interesting. We've got smart people like Scott Kelly, founder
23:44
Speaker 3: and CEO of Ato's Capital real Estate, is also waiver
23:47
Speaker 3: Tree Property Partners managing. Remember there, and then our good
23:50
Speaker 3: friend Abigail Do, a little market supporter for Bloomberg News.
23:53
Speaker 3: Abigail's got so many great relationships here and we appreciate
23:55
Speaker 3: her sharing them with Bloomberg Radio.
23:57
Speaker 4: Here talking about the commercial real estate business. I don't know.
24:00
Speaker 6: It's all about gyms and offices.
24:02
Speaker 4: I guess. I don't know.
24:03
Speaker 3: Back in the day, I came in at nine o'clock,
24:05
Speaker 3: We worked like ten or eleven o'clock. We got dinner
24:08
Speaker 3: and a car home, and that was That was just plenty.
24:11
Speaker 6: Now you need a sawn it, I know.
24:12
Speaker 4: Now I need to sign it.
24:15
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
24:19
Speaker 2: weekdays at ten am Eastern on Apple card Play and
24:22
Speaker 2: Android Outo with the Bloomberg Business app. You can also
24:25
Speaker 2: listen live on Amazon Alexa from our flagship New York station,
24:29
Speaker 2: Just say Alexa playing Bloomberg eleven thirty.
24:34
Speaker 3: Let's switch over to Nvidia here. I mean Stock's down
24:37
Speaker 3: two point six percent.
24:38
Speaker 4: I don't know.
24:39
Speaker 3: I thought the numbers were darn good. I need some
24:42
Speaker 3: perspective on this name. I need some perspective on AI
24:45
Speaker 3: because to me and I think for a lot of
24:47
Speaker 3: listeners a lot of viewers, AI is still something new.
24:50
Speaker 3: It's a new technology. I'm not really sure what it is.
24:52
Speaker 3: But our next guest has been really helpful and explaining
24:55
Speaker 3: what AI is and explaining.
24:57
Speaker 4: What the opportunities are. That is Gene Munster.
24:59
Speaker 3: He's a managing partner co founder of Loop Adventures, one
25:01
Speaker 3: of the leading voices in my opinion on all things technology.
25:05
Speaker 4: Hey, Gene, thanks so much for joining us.
25:07
Speaker 3: Can you give us your take on what we heard
25:09
Speaker 3: from Nvidia last night and how we should think of
25:12
Speaker 3: in Nvidia and AI going forward.
25:16
Speaker 10: Well, my take starts with what is a misunderstanding related
25:19
Speaker 10: to I think the narrative around this quarter and the
25:22
Speaker 10: guidance specifically, and the narrative is that the guidance is
25:27
Speaker 10: not as exciting as it was in the past. And
25:29
Speaker 10: so a few months ago when they reported their April quarter,
25:33
Speaker 10: they guided the out quarter of the July quarter up
25:36
Speaker 10: by five point two percent. So that's kind of the bogie.
25:39
Speaker 10: That's how investors thought about this October guide last night,
25:44
Speaker 10: and they only guided October up by two and a
25:46
Speaker 10: half percent, and that diminishing return effectively on the upside
25:52
Speaker 10: is something that is dominated. I think this view that
25:56
Speaker 10: the second derivative is not working in the advantage of Nvidia,
26:00
Speaker 10: that's just not the beats are raises are not as exciting.
26:05
Speaker 10: But that view misses a critical point. And it is
26:09
Speaker 10: very clear, even though they were not clear on the
26:11
Speaker 10: call that this Blackwell chip, this next generation chip, was
26:15
Speaker 10: delayed by three months, and if you go back and
26:17
Speaker 10: listen to their earnings call three months ago, they were
26:20
Speaker 10: very clear. They use the word ramp in October. That's
26:24
Speaker 10: when the revenue is going to ramp for Blackwell, and
26:27
Speaker 10: now they're saying that that is going to ramp in
26:28
Speaker 10: the January quarter. So, Paul, if you take that revenue
26:32
Speaker 10: and basically bring it back into the October quarter, it's
26:35
Speaker 10: about three billion in revenue. They would have actually raised
26:38
Speaker 10: revenue by twelve percent, and I think so that's an
26:42
Speaker 10: acceleration from the five percent raise that they did three
26:46
Speaker 10: months ago. I think that is the reality is that
26:49
Speaker 10: this business continues to accelerate nicely.
26:53
Speaker 6: Gene. I think intuitively, investors when they see a stock
26:57
Speaker 6: that's run up so much so quickly, they get nervous
27:02
Speaker 6: that we've hit you know, we've hit euphoria, we've hit
27:05
Speaker 6: peak AI. What are you telling you know, those investors
27:10
Speaker 6: who are just skeptical of just how quickly this stock
27:13
Speaker 6: has moved up higher? What are you telling them? Because
27:16
Speaker 6: you are still owning in Nvidia at deep water.
27:21
Speaker 10: That's right, we still own this And I would tell them,
27:25
Speaker 10: I would just ask a question about just fundamentally, how
27:28
Speaker 10: do they see AI plane out over the next several years,
27:32
Speaker 10: and if you believe that this is going to be
27:34
Speaker 10: truly transformative more than for example, the smartphone or the internet,
27:39
Speaker 10: I would tell them that just continue to stay the course.
27:42
Speaker 10: This is a rocket ship. You can debate whether you
27:45
Speaker 10: have a window seat and that would be akin to
27:48
Speaker 10: your entry price to in Nvidia or an aisle seat.
27:51
Speaker 10: But either way, this ship is going to continue to
27:54
Speaker 10: go up. Because at the end of the day, is
27:57
Speaker 10: that in order for AI to come to its full
28:01
Speaker 10: capacity of general intelligence and eventually superintelligence, we need to scale.
28:07
Speaker 10: And scale requires not only more compute capacity, but more data.
28:11
Speaker 10: If you continue to need more compute and data, then
28:15
Speaker 10: in video is going to be a beneficiary of that.
28:17
Speaker 10: And so we also have a venture investing business. We
28:20
Speaker 10: invest in technologies. Some of them compete with what in
28:24
Speaker 10: video is doing, and we know from that side how
28:27
Speaker 10: difficult it is to close that gap, and so I
28:30
Speaker 10: think they will continue the market, will continue to need
28:35
Speaker 10: their chips to enable what I think is a very
28:39
Speaker 10: robust outlook for AI. And just to put a final
28:42
Speaker 10: thought on Emily, is that I think we're in a
28:44
Speaker 10: three to five year bowl market still early. I don't
28:47
Speaker 10: think we're even close to a peak. I understand why
28:51
Speaker 10: people are nervous when you see the movement in video
28:53
Speaker 10: of the last couple of years, but I think it's
28:55
Speaker 10: an uncomfortable truth about this market is it's going to
28:58
Speaker 10: continue to go higher.
29:00
Speaker 3: Hey, Gene, a reader just kind of piped up here
29:03
Speaker 3: and said, how about some of the competitors, like some
29:05
Speaker 3: of their customers might be competitors in terms of these
29:07
Speaker 3: chips frame that force.
29:11
Speaker 10: So some of the customers make their own chips. Microsoft
29:14
Speaker 10: makes its own chips. You also have companies like Google
29:19
Speaker 10: has their tensor chip, and so Amazon's working on different chips.
29:24
Speaker 10: And so these are the hyperscalers, and these are the
29:27
Speaker 10: parts of the business that have been kind of fueling
29:30
Speaker 10: a lot of the growth and if you just look
29:31
Speaker 10: at think about in total how much of their growth
29:34
Speaker 10: has come from the hyperscalers, it's probably about sixty percent
29:38
Speaker 10: over the last year. And so it's been really important
29:42
Speaker 10: at the end of the day, is that I continue
29:45
Speaker 10: to believe that they will the hyperscalers will start to
29:48
Speaker 10: add some of their own chips. They still don't have
29:51
Speaker 10: the performance. And this is the central point. Just because
29:54
Speaker 10: you're creating a chip doesn't mean that it has the
29:57
Speaker 10: same performance as Nvidio GPU. And a big part of
30:01
Speaker 10: the call last night was Jensen trying to educate investors
30:06
Speaker 10: about how the hyperscalers think about the return on investment
30:10
Speaker 10: and that there is a return on investment for spending
30:13
Speaker 10: these buying these more expensive chips, and so simply football
30:17
Speaker 10: is that just because they're working on chips doesn't mean
30:19
Speaker 10: that they are comparable to in videos GPUs A.
30:22
Speaker 4: Gene, thanks so much again for joining us.
30:24
Speaker 3: We really appreciate getting some of your time helping us
30:26
Speaker 3: really understand what's going on out there in the world
30:28
Speaker 3: of technology and in this.
30:29
Speaker 4: New phase of it.
30:30
Speaker 3: Including Ai Gene Munster, he's a Mansion partner. He's a
30:33
Speaker 3: co founder of Loop Adventures. He's based in Minneapolis. He's
30:35
Speaker 3: been covering to tech industry really for decades and gives
30:39
Speaker 3: us a good perspective on AI. And as I remember,
30:42
Speaker 3: Gen probably told us maybe a year ago, or maybe
30:44
Speaker 3: more than a year ago, kind of just how big
30:46
Speaker 3: AI is relative to things like, oh, I don't know
30:49
Speaker 3: the internet and the electricity, and he puts it in
30:53
Speaker 3: that context, and that kind of gives you a good
30:56
Speaker 3: frame of reference for perhaps how big this AI can
30:59
Speaker 3: be for everyone.
31:02
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
31:06
Speaker 2: weekdays at ten am Eastern on Applecar Play and Android
31:09
Speaker 2: Auto with the Bloomberg Business app. You can also listen
31:12
Speaker 2: live on Amazon Alexa from our flagship New York station,
31:16
Speaker 2: Just say Alexa play Bloomberg eleven thirty.
31:21
Speaker 3: Aside from Nvidia Emily, another big tech story out there's ASML.
31:25
Speaker 3: The Netherlands plans to limit ASML Holding's ability to repair
31:30
Speaker 3: and maintain its semiconductor equipment in China, a potentially painful
31:34
Speaker 3: blow to Beijing's efforts to develop a world class chip industry.
31:38
Speaker 3: So that tech cold war seems to be pretty hot
31:42
Speaker 3: out there these days.
31:42
Speaker 4: Let's get some latest on that. We'll do that with
31:44
Speaker 4: Sarah Jacob.
31:45
Speaker 3: She's an Amsterdam beurea reporter for Bloomberg News, joining us
31:48
Speaker 3: from Amsterdam via Zoom Sarah.
31:50
Speaker 4: This seems like a pretty big step.
31:52
Speaker 3: By the Netherlands government to limit ASML's business with China.
31:57
Speaker 4: Give us the background.
32:00
Speaker 1: Well, essentially, the Dutch government will likely not renew certain
32:04
Speaker 1: ASML licenses to service and provide spare parts for its
32:07
Speaker 1: chip equipment when some of those licenses expired the end
32:10
Speaker 1: of this year. The move is expected to cover ASML's
32:14
Speaker 1: top of the line machine So we're talking to v machines,
32:17
Speaker 1: which are deep ultra lithography machines. We know that ASML's
32:21
Speaker 1: most advanced ship making equipment are sold with maintenance agreements,
32:25
Speaker 1: So a decision to limit ASML's ability to repair and
32:29
Speaker 1: maintain those machines could could make at least some of
32:33
Speaker 1: those machines inoperable in China as soon as next year.
32:37
Speaker 6: And what was the rationale behind this ban?
32:41
Speaker 1: Well, the Biden administration has sought to limit China's advances
32:45
Speaker 1: in the semiconductor sector for some time now, and it
32:49
Speaker 1: has implemented sweeping export controls on China on the sale
32:52
Speaker 1: of advanced chip making equipment over citing national security grounds.
32:56
Speaker 1: So we have also previously reported that the administration, the
33:00
Speaker 1: administration has raised the possibility of opposing the FDPR, which
33:04
Speaker 1: is essentially a rule that allows American officials to control
33:07
Speaker 1: the flow of foreign products built with even the tiniest
33:10
Speaker 1: amount of you know, technology originating from the US. And
33:14
Speaker 1: in this context, the US has sort of also been
33:16
Speaker 1: urging the Dutch government in many of its allies to
33:18
Speaker 1: align their China controls with the US. So that's sort
33:21
Speaker 1: of the backdrop for this move.
33:26
Speaker 3: You know, what percentage or how big is China for ASML?
33:31
Speaker 3: Because I'm looking at the stock. The stock's actually up today.
33:33
Speaker 3: I thought it would have been down and down maybe materially.
33:38
Speaker 8: Well.
33:38
Speaker 1: China, yes, China is you know, accounts for about half
33:41
Speaker 1: of a SML sales, So we do expect if this
33:45
Speaker 1: were to be announced, it would impact smls sales and
33:49
Speaker 1: these new curbs would put a SML and the same
33:51
Speaker 1: constraints that US pers such as you know, applied materials
33:55
Speaker 1: are is experiencing. But the implications of such a move
33:58
Speaker 1: also is for China, right, it's in terms of obtaining
34:03
Speaker 1: most spare paths brings and maintaining machines are critical to
34:06
Speaker 1: the smooth operation of a chip plant, and China relies
34:09
Speaker 1: on a SML's emotion DUV lithography systems to advance its
34:13
Speaker 1: ship making technology. So for China it would be a
34:16
Speaker 1: blow to in its efforts to develop its SCHIP industry,
34:19
Speaker 1: could make it difficult for Huawei and Semiconductor Manufacturing International
34:23
Speaker 1: cop to make breakthroughs in their current capability.
34:28
Speaker 6: Is this ban expected to then If it's not going
34:31
Speaker 6: to be good for the huaweis of the of the world,
34:35
Speaker 6: is it better then for US chip companies? Is that
34:39
Speaker 6: the idea.
34:40
Speaker 1: Here I s it's essentially just part of this broad
34:45
Speaker 1: uh broad uh you know or planned by the Biden
34:48
Speaker 1: administration and its allies to sort of limit China's advances.
34:52
Speaker 1: So that's the real goal over here. And SML being
34:56
Speaker 1: you know, one of the largest and in you know
35:00
Speaker 1: uh so makes makes this most advanced ship making equipment
35:04
Speaker 1: that others don't have in the world, is very critical
35:07
Speaker 1: in this whole plan across with the US and the
35:12
Speaker 1: Dutch government.
35:13
Speaker 3: What extent, Sarah is the feeling within you know, the
35:17
Speaker 3: Netherlands that this is a SML just following US policy
35:20
Speaker 3: versus maybe acting a little bit more independently.
35:23
Speaker 4: How willingly is a SML doing this?
35:27
Speaker 5: Well?
35:28
Speaker 1: Uh, this is this is coming from the Dutch government.
35:31
Speaker 1: So the Dutch government under Prime Minister Mark Rutter, which
35:34
Speaker 1: was the previous prime minister, had resisted US pressure to
35:38
Speaker 1: add is just new restrictions on servicing, arguing that, you know,
35:41
Speaker 1: they needed more time to evaluate how the the the
35:45
Speaker 1: export bands had taken effect. But we say with the
35:47
Speaker 1: new administration, Dutch Prime Minister Dick Scorefolio this month said
35:51
Speaker 1: the government has good negotiations with US in Japan and
35:54
Speaker 1: he expects the will end with good results. So we'll
35:57
Speaker 1: have to see.
35:59
Speaker 3: Sarah Jacob, thank you so much for joining us. Really
36:01
Speaker 3: appreciate that. Sarah Jacob. She's at Amsterdam bureau reporter for
36:04
Speaker 3: Bloomberg News. How cool is it when you got news
36:07
Speaker 3: coming out of Amsterdam. We have a bureau there, and
36:10
Speaker 3: we have an expert right there that we can talk to.
36:13
Speaker 3: That is the power folks of Bloomberg News. Matt Winkler
36:16
Speaker 3: building that with Mike way way back in the day,
36:19
Speaker 3: and we can tap into that.
36:21
Speaker 4: For Bloomberg Radios's great stuff.
36:22
Speaker 3: Sarah Jacob Amsterdam Brewer reported there on ASML.
36:26
Speaker 2: This is the Bloomberg Intelligence podcast, available on apples, Spotify,
36:30
Speaker 2: and anywhere else you get your podcasts. Listen live each weekday,
36:34
Speaker 2: ten am to noon Eastern on Bloomberg dot com, the
36:37
Speaker 2: iHeartRadio app tune In, and the Bloomberg Business app. You
36:41
Speaker 2: can also watch us live every weekday on YouTube and
36:44
Speaker 2: always on the Bloomberg terminal